Emerging cloud providers (“NeoClouds”) are sticking exclusively with NVIDIA, despite alternatives from AMD. The perceived performance risk is too high, as customers demand state-of-the-art inference speed and providers can't risk a multi-billion dollar investment on a non-NVIDIA stack that might offer lower throughput.

NVIDIA's revenue-sharing deals, which financially backstop GPU purchases for young cloud providers, create a deep dependency. This fosters loyalty to NVIDIA's entire product stack without explicit exclusivity clauses, strengthening its market dominance and creating a powerful, subtle lock-in effect.

By funding and backstopping CoreWeave, which exclusively uses its GPUs, NVIDIA establishes its hardware as the default for the AI cloud. This gives NVIDIA leverage over major customers like Microsoft and Amazon, who are developing their own chips. It makes switching to proprietary silicon more difficult, creating a competitive moat based on market structure, not just technology.

Despite major tech companies developing their own AI chips, CoreWeave's clients exclusively demand Nvidia hardware. This is attributed to the mature CUDA software platform, which provides an efficient, scalable, and reliable ecosystem that competitors have been unable to replicate.

While known for its GPUs, Nvidia's real competitive advantage comes from years of hands-on work integrating its entire stack with companies across many industries. This deep partnership model makes it incredibly difficult for customers to switch to competitors.

Large tech companies are actively diversifying their AI chip supply to avoid lock-in with NVIDIA. However, the true challenge isn't just hardware performance. NVIDIA's powerful moat is its extensive software and developer ecosystem, which competitors must also build to truly break free from its market dominance.

Specialized AI cloud providers like Nebius don't aim to push alternative chips like AMD or TPUs. Instead, they are "market catchers," responding directly to overwhelming customer demand, which is currently focused entirely on NVIDIA. This demand-driven approach dictates their hardware strategy.

NVIDIA is strategically repositioning itself beyond just hardware. Through collaborations like the one with Groq for inference-specific chips and partnerships with cloud providers, the company is building a comprehensive AI platform that covers the entire AI lifecycle, from training and inference to agent orchestration, signaling a major strategic shift.

NVIDIA's investment in its customer, cloud provider Nebius, isn't just financial support. It's a strategic move to directly fund the purchase of NVIDIA's own next-generation GPUs, creating a captive market and accelerating its sales cycle for high-demand chips.